The Under-Employment Rate

The figures look impressive. At 4.8 per cent, Australia’s unemployment rate is lower than it has been in three decades. It doesn’t get much better than this. Or does it?

Well, yes, actually. Or at least it should, according to economists, academics and some of Australia’s largest companies.

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Measured unemployment may be at a 30-year low, but there are nearly as many people again who regard themselves as either underemployed or marginally attached to the workforce. The Australian Bureau of Statistics’s labour utilisation series shows under-employment running at about 12 per cent.

A person is defined as unemployed if they do not have work, but are available for and are actively seeking work. The unemployment rate measures the number of people unemployed as a percentage of the economically active population. ‘You are considered to be employed if you work one hour a week,’ explains Dr Bill Mitchell, Director of the Centre of Full Employment and Equity at the University of Newcastle.

Mitchell argues the current person-based measure of unemployment fails to capture the splintering of full-time, permanent jobs into part-time and casual positions that has occurred since 1980:

Sixty per cent of all new jobs created are part-time and 60 per cent of these are casual jobs. So this 4.8 per cent figure cannot be compared to what a similar unemployment rate would have looked like in the 1970s or 1980s.

CommSec Chief Equities Economist, Craig James, agrees, saying that if the job market was as tight as the headline figure suggests, ‘then wages would be higher and that has not happened.’

James points out that, compared to New Zealand and the US, ‘Australia has a low participation rate, so there’s plenty of room for improvement.’ (The US participation rate is 66.2 per cent , and New Zealand’s is now 68.8 per cent, while Australia’s is currently 65.1 per cent.)

James’s most recent report, based on the latest results from recruitment company SEEK, shows tentative signs of a softening in the job market:

The SEEK employment indicator fell by 4.5 per cent in July to stand 7.6 per cent lower than a year ago. But demand for jobs in Western Australia remains robust, compared with softening conditions in NSW, South Australia and Victoria.

But the clearest signal from the survey concerns Australia’s ‘two speed’ economy. In early 2005, the job markets in NSW and Western Australia were in similar shape. But just over 18 months down the track, the two States are as similar as chalk and cheese. Job seekers can freely pick and choose from available positions in Western Australia, while there is much more intense competition for available jobs in NSW.

So does the nature of employment matter if the number of those employed continues to grow?

John Buchanan, Deputy Director of the Workplace Research Centre at the University of Sydney, suggests the big rise of casual and part-time workers has created ‘some winners and a deepening and reconfiguration of inequality.’ This has come about as a result of ‘successfully shifting the costs and risks of working away from employers and the State and increasingly onto households especially marginal participants in the labour market.’

Australia has one of the highest rates of casual workers in the OECD, second only to Spain at 32 per cent. Over the last 20 years, the percentage of casual workers has climbed from 10 per cent to about 25 per cent today.

With the NSW economy slowing and employment weakening, Dr Mitchell points to western Sydney as an area showing rising unemployment and, ‘real vulnerability to both rising interest rates and petrol price increases.’

I spoke to two owner/operators of small businesses in western Sydney, and asked them to describe the employment strategy they used for their businesses.

Thanks to Fiona Katauskas

Bella Vista is a new suburb nestled in a valley behind the Hillsong Church complex in Sydney’s western suburbs. Few of the large homes are much older than five years and the local shopping centre does a brisk trade.

Melody Boumelhem has been running Norwest Florist for just over four years. While she and her husband both work full-time for Melody that means a 70- to 80-hour week of her six employees, about four work part-time and two are casuals.

Because her business demands skilled labour, she is constantly on the lookout for skilled workers, particularly, ‘mature women who have the right attitude to work.’ While she begrudges the extra hours she has to spend doing her BAS statements and ‘all the tax collecting that used to be done by the Government,’ she is a keen supporter of the new deregulated workforce.

‘I know Workchoices means things are tougher for some people, but it’s great for us. It means if someone isn’t working out we can just say œgo  and not worry about it.’

In a perfect world Boumelhem would employ more full-time workers but, ‘the lease agreement at this [shopping]centre like every other centre in NSW demands we trade from 8:00am to 7:00pm seven days a week, so we need part-time and casual workers to cover all those hours,’ she says

Denise Dodd, owner of the Bella Rose Dry Cleaners at Bella Vista employs eight people; five are full-time and three casuals:

It’s hard finding the skilled workers who will do the hours involved in working full-time. Men like full-time work, but all my casuals are women who only want to work around school hours. But I admit, if I did put on more people, I would put them on as casuals.

This may seem like a win/win situation for all concerned. But business is starting to feel the effect of an increasingly financially insecure workforce.

As Craig James told me recently, ‘Job security certainly isn’t what it was 30 years ago and people spend their money differently if their employment is insecure.’

Indeed, last June the Australand Property Group pointed to the fall in full-time employment across NSW and Victoria to explain why their share price fell by 8 per cent.

A 2004 study done by Barbara Pocock, Rosslyn Prosser and Ken Bridge from the University of Adelaide entitled, ‘Only a Casual’ How Casual Work Affects Employees, Households & Communities in Australia,   includes extensive interviews with 55 randomly selected casual workers from across Australia.

While a quarter of those interviewed were positive about being casual most of these being students, younger people or women with dependents the study found that two thirds of the interviewees were reluctant casuals. According to ‘Alice,’ a 43-year-old casual work processor:

I think you are used and abused. I was always under the impression that casual workers were there for overload situations, emergencies, or whatever, but I’ve been casual for five years now. ‘We’ll look at that next year,’ is the general reply to any request for permanency.

Perhaps most importantly in terms of the national economy, the study’s authors found many casual workers experience significant financial and job insecurity, because their pay packets vary from week to week.

‘Mary,’ a 4
7-year-old casual supermarket night fill worker recently made permanent, said ‘When you’re casual you can’t plan that œokay, I’m going to do this, this and this  because you weren’t sure whether that money was going to be there to be able to do it.’

And ‘Dorothy,’ a 53-year-old casual research assistant, said, ‘I can’t get a mortgage and I can’t plan to have a break when I need it.’

‘Barney,’ a 60-year-old casual security guard, sums up: ‘Everything about your financial circumstances is determined at work. And because there’s no permanent relationship, it’s all very uncertain. It’s a constant feeling of insecurity.’

Dr Mitchell believes that with between 25 to 27 per cent of the workforce now employed on either a part-time or casual basis, ‘Australia’s income potential is being undermined and our material standards are lower than they should be. And we can measure all of that.’

What can’t be measured, says Mitchell, is ‘family breakdown stemming from this kind of stress, an over-burdened criminal justice system and deteriorating mental health for many Australians.’

This is the other side of the 4.8 per cent unemployment rate story. The problem with this side is it’s complicated and takes more than a headline to explain.